Tuesday, November 29, 2011

"After all, in an idealized market economy each worker would be paid exactly what he or she contributes to the economy by choosing to work, no more and no less. And this would be equally true for workers making $30,000 a year and executives making $30 million a year." -- Paul Krugman

"There is the problem of the relative levels of different types of earned income. Here we have the famous marginal productivity theory... The real wage of each type of labour is supposed to measure its marginal product to society. The salary of a professor of economics measures his contribution to society and the wage of a garbage collector measures his contribution. Of course this is a very comforting doctrine for professors of economics but I fear that once more the argument is circular. There is not any measure of marginal products except the wages themselves. In short, we have not got a theory of distribution. We have nothing to say on the subject which above all others occupies the minds of the people whom economics is supposed to enlighten." -- Joan Robinson

I like to refute the existence of the so-called marginal productivity theory of distribution with reswitchingexamples. In such examples, at least two vastly different distributions of income between wages and profits are associated with a single technique. Presumably in Krugman's morality play, the owner of each factor of production would be making the same "contribution" to the economy, whichever income distribution happened to prevail. Furthermore, it can be the case that a higher wage results in more labor being hired by cost-minimizing competitive firms. A similar point can be made with models withheterogeouslabor.

I welcome Krugman's support for (some) good policies - including in the referenced newspaper column, despite his archaic knowledge of economics.

Saturday, November 26, 2011

Was any historian of economics more prominent throughout the last half century? As I understand it, David Ricardo was an early area of concentration for Blaug, even influencing him in naming his son. It's been decades since I read Blaug's 1958 book on Ricardo, and I recall it hardly at all. As you can see, he wrote it just after Sraffa had provided a trove of new materials and scholarship on Ricardo, but before the novelty of Sraffa's interpretation was widely apparent. Blaug's work spans changes in standards in history, including the development of more contextualized, thick, postmodern histories.

The first edition of Blaug's Economic Theory in Retrospect was published in 1962, and later editions came out in 1968, 1978, 1985, and 1997. I can comment on the fourth edition. I particularly like the suggested readings at the end of each chapter, which, as far I can see, provide tasteful selections of competing interpretations. And I appreciate the reading guides to various classic books. The fourth edition guides are to Smith's The Wealth of Nations, Ricardo's Principles, J. S. Mill's Principles, Marx's Capital, Marshall's Principles, Wicksteed's Common Sense of Political Economy, Wicksell's Lectures. I find the book too Whiggish for my tastes, and I have differences with Blaug throughout. Nevertheless, I can say Blaug seems equally at home in writing about any economist in the period from before Smith to after Keynes.

Blaug has been quarreling with Sraffians for decades. Consequently, I have previously hadsomethingto say about his work. The current issue of the History of Political Economy contains a posthumous article by Garegnani and an article by Kurz and Salvadori, both counter-attacking Blaug's most recent attack on Sraffians. A demand for empirical demonstrations of Sraffa effects is a defense of neoclassical economics I have never found plausible. The Cambridge critique is a logical demonstration of the incoherence of neoclassical theory. I think this defense on the basis of supposed empiricism was introduced by C. E. Ferguson, but Blaug may have been the most consistent advocate of this point of view.

Blaug has also been a critic of trends in mainstream economics, especially the effects of the formalist revolution, which he dates to the 1950s. I found particularly surprising a recent article praising Henry George.

I have nothing to say about the economics of art and the economics of education, apparently two fields in which Blaug had a lot to say.

Carlo Panico (2002). "Misunderstanding the Sraffian Reading of the Classical Theory of Value and Distribution: A Note", in Competing Economic Theories: Essays on Memory of Giovanni Caravale (ed. by Nisticò and D. Tosato), Routledge.

Tuesday, November 22, 2011

A couple of weeks ago, I mentioned the Harvard students walkout on Mankiw's introductory economics class. Gabriel Bayard and Rachel Sandalow-Ash, apparently two Harvard undergrads, had an article in the Harvard Crimson a couple of tuesdays ago. This article has better points than the "Open Letter to Greg Mankiw" closer to the date of the walkout. Daniel MacDonald has other links.

Last October, I briefly surveyed some experimental evidence, including a paper by Romer and Romer, demonstrating the existence of the Keynesian multiplier. Christina Romer has a more comprehensive presentation of the evidence. (Hat tip:Paul Krugman.)

Thursday, November 17, 2011

Yesterday, National Public Radio concluded a three part series. Each day surveyed a thinker have shaped the past and may shape the future. I'll ignore the first part, since it was about a deluded non-philosopher. Tuesday, NPR covered Friedrich Hayek. Yesterday, they discussed John Maynard Keynes.

Saturday, November 12, 2011

Adam Smith did not use the phrase "The invisible hand" to refer to the optimality properties of a static general equilibrium supposedly brought about by the workings of competitive markets.

Thomas Carlyle did not coin the phrase "The dismal science" to refer to Thomas Malthus's anti-utopian theory of population. According to that theory, human population responds endogenously to increased prosperity, thereby making impossible any rapidly established, long-lasting general rise in per capita income beyond the custom and habits of mankind.

John Maynard Keynes, in The General Theory of Employment, Interest, and Money, did not explain widespread and persistent unemployment by sticky, rigid, or slowly adjusting money wages and prices - a pre-Keynesian theory that, in fact, he opposed.

Many economists, I claim, teach the opposite of these propositions. Here, for example, is Tyler Cowen falsely characterizing Keynes' theory (at least, if "Keynesian" is supposed to refer to that theory):

"You can even give this all a Keynesian take... Since 1997-2000, there is downward pressure on lots of wages, but morale matters and labor market incumbents retain a favored position. Though some wages fall, employers resist that downward pressure, and pass along a lot of the burden of adjustment to new job seekers. Even if that original downward pressure on wages is smallish, new job seekers have to make big adjustments in their career plans, majors, ambitions, etc. to get through the door at all. They didn't." -- Tyler Cowen

It seems to be a quixotic and never-ending task to oppose demonstrably false statements about economics, often made by economists. Gavin Kennedy illustrates such a quest in defense of my first proposition.

Thursday, November 10, 2011

Note to myself: I liked this recipe. Next time, consider making it with only two peppers. On the other hand, despite the leftover sauce, having a slightly different pepper taste with each bite is neat. Maybe I'll look for other recipes at that site.

(The sides in this case are mashed sweet potatoes and a cut-up Granny Smith apple with a little bit of sugar sprinkled and mixed in. I like a mixture of cut-up apples and pears, too.)

Sunday, November 06, 2011

Arjo Klamer has a blog, mainly in dutch. In one post in English, he argues that the award of the Nobel to Sargent and Sims symbolizes the failure of economics.

The U.S. Solidarity Economy Network (SEN) looks like an interesting site to explore. They attempt "to connect a diverse array of individuals, organizations, businesses and projects in the shared work of building and strengthening regional, national and international movements for a solidarity economy."

A group anti-Mankiw blog has been created to respond to the bushwa Mankiw posts on his blog. (Hat tip to Daniel MacDonald, who has quite a bit to say about walking out on Mankiw's class and the incoherence of his textbook.)

Corey Robin has a blog. His book, The Reactionary Mind: Conservatism from Edmund Burke to Sarah Palin, argues that what unites conservatives is reacting against attempts of oppressed groups (slaves vs. masters, workers vs. capitalists, women vs. men) to assert agency. The reaction is important - conservatives are often modernizers and derisive of the abilities of the ruling classes that they are attempting to defend. His book is analytical, not mocking, and not arguing for what is to be done.

Wednesday, November 02, 2011

Apparently, some Harvard students areplanning on an organized walkout on Mankiw's introductory economics class today. This action is planned in solidarity with the Occupy Wall Street movement.

StephenMarglin is one Harvard economist I respect. I find the Harvard Crimson has been, with difficulty*, scanning back issues. Apparently, they rewrote the same article about Marglin every few years for a while there: 1975, 1980, 1982, 2009. Here's a 2009 article about his controversial introductory economics class.

Update:CNN and the Crimson report on the results. An open letter to Greg Mankiw, from one of the organizers, explains the action. Some Harvard student has a response at the same site.